S8 seizes a slab of Harvey World

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The travel agency sector encountered its second shock in a week
yesterday when Queensland property group S8 made a $78 million
hostile on-market bid for the large travel franchise, Harvey World
Travel.

This followed the departure of chief executive Shane Flynn from
Flight Centre last week, highlighting the growing focus on stemming
the decline in travel agency margins.

S8, based on the Gold Coast, said it would use the Harvey World
brand to cross-promote its 3500 apartments at 50 properties, which
were primarily located in Queensland.

S8 chairwoman Jenny Hutson said Harvey World franchisees would
receive a bigger commission for booking rooms in S8 properties. The
S8 apartments might be rebranded as "Harvey World Travel
Resorts".

S8 has held 4.9 per cent of Harvey World shares since December,
keeping it just under the sharemarket's disclosure threshold. It
entered friendly merger talks with Harvey World about two months
ago, but by last week the discussions had broken down.

S8 is no stranger to hostile takeovers, having launched an
unsuccessful bid for rival BreakFree in 2003 that led to four
Takeovers Panel hearings.

By the time it launched the $1.85 a share bid yesterday morning,
S8 already had a 19.9 per cent stake, acquired from both retail and
institutional investors. As of last night, S8 controlled 31.7 per
cent of the company.

Ms Hutson said S8 would like to acquire all shares through its
unconditional offer, but it was primarily focused on getting board
control through a majority stake.

Harvey World chief executive Barry Mayo advised shareholders to
take no action on the bid, which he called "undervalued". He noted
there was no advantage for shareholders to accept the on-market
offer before it closed on October 19 and said Harvey World was
seeking an independent share valuation.

Harvey World recently reported full-year earnings of $2.5
million on more than $1.7 billion in turnover, down from a $4.1
million profit the previous year.

Mr Mayo said the UK business was at an "investment stage" and
would make money in the longer term.

Although Flight Centre has been affected by the rise of
independent internet bookings, Ms Hutson said she thought Harvey
World still had good growth opportunities because its shops dealt
more with packaged holidays.

Harvey World shares rose 27c to a record $1.90 yesterday, while
S8 shares closed 12c higher at $2.03.